Domestic production of cars, trucks and buses fell to 9,968,440 units in fiscal 1998 slipping below the 10 million level for the first time in 20 years, an industry group said Monday.
Heads of major automakers have repeatedly said the 10 million level is important in that it affects decisions on workforce numbers.
According to the Japan Automobile Manufacturers Association, production fell 7.5 percent from the previous year and to its lowest level since fiscal 1978, when the figure hit 8,946,442.
The association blamed slack domestic sales and slow shipments to crisis-hit Asian countries for much of the decline.
"We cannot see any recovery of either domestic demand or exports at least until the second half of the (current) fiscal year," one association official said.
Production figures for March, meanwhile, saw the first year-on-year rise in five months.
Total domestic production in March was 1,014,036 units, up 3.8 percent from the same month the previous year.
But for all of fiscal 1998, which ended March 31, automobiles of all categories except minivehicles declined, the figures show.
Overall passenger vehicle production shrank 3.7 percent to 8,073,112 units during fiscal 1998.
While standard vehicles dropped 1.1 percent from the previous year to 3,069,809 units and small vehicles 9.9 percent to 3,943,429, minivehicles surged 18 percent to hit 1,059,874, the association said.
Domestic sales and production of minicars surged after automakers rushed to release new models in fall following the implementation of new size and safety regulations for minivehicles.
Trucks, meanwhile, took a particularly sharp drop from the previous year as production plummeted 21.1 percent to 1,841,887 units, the association said.
Of that figure, standard truck production fell 16.3 percent to 782,558 units compared with the year before, while small trucks sank 33 percent 478,677 and minitrucks 15.2 percent to 580,652 units.
Bus production declined to 53,441 units, a 14.1 percent fall from the previous year, according to the association.